The codec is a coder-decorder, or an algorithm to decode the video stream and display images on the screen. While there are thousands of video codec standards available, the popular ones are H.264, Theora, and VP8.
H.264, also known as “MPEG-4 part 10," “MPEG-4 AVC," or “MPEG-4 Advanced Video Coding.," as the name suggests was developed by the MPEG group and is compatible with all type of devices ranging from cell phones to desktop computers. Apple’s iPhone, Abode Flash, and YouTube all use this code. The main drawback of this standard however is patent licensing requirements that restrict free redistribution, making the format a non-starter for Mozilla and other open source browser vendors.
VP8 is a royalty free modern codec adopted by Google, and produces output on par with H264. However, Theora, another royalty-free codec that evolved from the VP3 codec is more popular and adopted by the OGG format. This codec is however limited in its effectiveness for large-scale video streaming, is bandwidth intensive, and experts fear that further development of this codec will raise patent issues.